Average UK house prices decreased 0.6% in the 12 months to January, to £282,000, representing an easing in the pace of decline, fresh data from the Office for National Statistics (ONS) showed yesterday.
Meanwhile, private rents rose at their fastest annual pace last month since comparable records began in 2015, the figures revealed.
The ONS reported a leap of 9% over the 12 months to February in a provisional estimate, up from the 8.5% annual rate seen in January.
The upwards pressure on rents has come in part from the widening supply-demand imbalance.
Industry reactions:
Tom Bill, head of UK residential research at Knight Frank commented: “Although UK house prices are heading back into positive territory, the recovery is slower and more inconsistent than expected two months ago. Mixed signals on inflation mean rate cut expectations have cooled, mortgage costs have crept up and downwards pressure on house prices has increased. Based on current evidence, buyers can expect a rate cut in the summer rather than the spring although mortgage rates may fall slightly in coming months if core inflation comes under control.”
Greg Tsuman, director of lettings at Martyn Gerrard Estate Agents, said: “It is sadly unsurprising that we are witnessing the highest increase in private rents since records began. The market is under immense pressure on every front – high interest rates, a total lack of new supply for housing and landlords exiting the market due to onerous tax obligations. This has created a perfect storm and things are likely to continue deteriorating without radical change. The situation is compounded by the fact that the population has grown by over six million since 2008 and is now forecast to hit 70 million much earlier than previously expected and these people need homes to live in.
“With little social housing available, it falls to the private sector to provide affordable options for housing. However, Government measures have disincentivised landlords and prevented the market from working effectively. Section 24 of the Finance Act has forced landlords to pay taxes on turnover rather than just profit, meaning they are being taxed on interest payments, which have increased dramatically. With rates remaining high, landlords are forced to increase rents and pass on the costs to tenants. Meanwhile, many have been unable to make the sums add up and have left the market altogether, reducing supply while demand is rapidly increasing – adding further market pressure on prices.”
“The government needs to act urgently because this situation is unsustainable. Reform is needed to dramatically increase the supply of housing and we need to urgently review the tax regime for private landlords and reintroduce mortgage interest relief by scrapping Section 24. This would attract landlords back to the market and help fix the supply gap”.
Iain McKenzie, CEO of The Guild of Property Professionals, remarked: “Now that the dust has settled, we can see that last year was not as disastrous for the property market as analysts had feared.
“An annual fall of 0.6% is a modest readjustment in prices that was overdue after a period of significant growth during the pandemic years.
“This will come as welcome news to sellers that may have been cautious about putting their house up for sale.
“It is clear that while there has been some volatility in house prices over the past year, now is still a good time to buy. Rental prices have not had the chance to catch a breath and continue to climb despite the financial pressures facing households.
“If you are looking at getting yourself on the ladder, the best people to advise on what you should expect to pay would be at your local estate agent. They will also be able to tell you how much the average rent prices are in your area so that you can tell if you are overpaying for what you have.”
Nicholas Finn, MD of Garrington Property Finders, commented: “Average house prices were still being held in check at the start of the year, but the figures today suggest they are starting to recover some of the ground lost during 2023’s reset.
“Scotland stands out particularly as prices have jumped 4.8% compared to where they were this time last year.
“Two things are now keeping prices in a holding pattern however – an uptick in the number of homes coming onto the market and a levelling off in mortgage rates. Further falls in the cost of borrowing may be some months off and this may take some steam out of price inflation.
“As a result, well-informed buyers who have their finances in place are still striking highly competitive deals.
“With many areas offering notably better value than they did during the post-pandemic boom, buyer appetite is back as many people who delayed their moving plans last year decide that now is the time to act before prices pick up speed again.
“Like many inflationary signals, house prices are showing earlier-than-expected signs of recovery following a year that saw low transaction volume and values last year. With the improved borrowing environment, buyers are returning ahead of the spring market.”
Fred Jones, chief operating officer at instant buying firm UPSTIX, added: “On Monday, Rightmove said that house prices were higher than a year ago, and today, official statistics say the opposite. Why? Because they are comparing apples and oranges.
“Rightmove’s data records asking prices, which reflect a level of optimism many would consider unwarranted. The ONS measures official sale prices. While the market has avoided the crash that many had predicted when interest rates began to rise, it remains constrained, with sale times the longest for four years.
“This disconnect has a clear implication: sellers must be realistic about pricing if they want their transactions to complete.”